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Bear of the Day: Shoe Carnival (SCVL)

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Shoe Carnival (SCVL - Free Report)  is a Zacks Rank #5 (Strong Sell) that operates as a family footwear retailer in the United States.  The company offers a broad assortment of moderately priced dress, casual and athletic footwear for men, women, and children with emphasis on national and regional name brands. 

The stock has struggled all year, trading lower by about 13%. Investors must ask themselves why the stock is down when the overall market is up.

The answer seems to be earnings, with the company missing two of the last three quarters.

About the Company

Shoe Carnival is headquartered in Evansville, IN.The company was founded in 1978 and employs 2,500 people. It operates 404 stores in 33 states and Puerto Rico, and offers online shopping at its website.

SCVL isvalued at $600 million and has a Forward PE of 7. The stock holds Zacks Style Scores of “A” in Value, but “F” in Growth. The stock pays a dividend of about 2%.

Q4 Earnings

Shoe Carnival reported earnings in late August, missing expectations by 12%. Revenues were down year over year and they cut their outlook.

For FY23, the company now sees $3.10-3.25 v the 3.60 expected. Same Store Sales are now expected at -8% to -6% v the -2% to +2% expected. The company cut new store expectations to 6-10 v the prior 10-20.

Gross margin was an issue too, down 40bps year over year.

In their back to school update the company said that “Market conditions continued to modestly improve in early third quarter 2023 versus second quarter 2023.” Management added that August sales and profits were close to record highs and margins were near records.

While the back-to-school season seems to be doing well, estimates are coming down.


Since earnings analysts have lowered estimates.

Over the last 30 days, numbers for the current quarter were cut from $1.28 to $1.02, or 25%.

For the current year, analysts lowered estimates from $3.60 to $3.17, or 12%.

Technical Take

When you zoom out on the SCVL chart something becomes very clear. The $20 level is very important.

From 2018 to 2021 this was the resistance. The stock broke out in early 2021 and has come back to the $20 level where it has been supported.

If this level breaks, the stock could see another leg lower to the $15 area.

Looking at resistance, all the moving averages are above the current rpice. The 21-day is sloping lower and is currently under $23.

The $24 level is where both the 50-day and 200-day reside. They are flat for now and would offer major resistance on any rally.

In Summary

It has been a tough year at the carnival, but the show must go on. The back-to-school report was positive, but the company needs a full quarter to change the trend in the stock.

Bulls need to be cautious of the $20 level and for now, there seems to be better places to put money to work.

For those interested in the sector, a better option might be Boot Barn (BOOT - Free Report) . The stock is a Zacks Rank #1 (Buy) and is up over 40% on the year.

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